Loading ...Financial Markets Don’t Have The Faintest Inkling Of Potential Geopolitical Risk
“Every generation suffers its particular fantasies. So it was a century ago. Investors had grown so immune to the consequences of war that bond markets from London to Vienna didn’t flinch after the assassination that provoked World War I.“Three weeks later, in the summer of 1914, the fear premium amounted to a total of one basis point. Then, in quick order, European markets ceased to function. A notable feature of this paralysis is that nothing of substance had changed – war had not been declared by any of the parties, but by now, minds were hyperventilating.”
Perhaps the motivation for the cerebral excitement was the rapid realization during the July 1914 Crisis that complex political alliances had turned the European continent into a giant Mexican standoff. The risk of a stock or bond market selloff was quickly overshadowed by the prospect of something much greater. That the diabolical self-annihilation of European society itself was, in fact, just moments away.
Geopolitical Shocks and Financial Markets
It would be wrong to draw close parallels between the geopolitical landscape in Europe circa 1914 and the Middle East circa 2020. This is not our intent. We’re merely citing this as an example of how quickly financial markets can go from full functioning to complete breakdown.